completecommodities sm · commodity trading involves substantial risk of loss. source: bloomberg...

0 Proprietary & Confidential Materials. Not for duplication or re-distribution.

CompleteCommodities

October 2013

SM


Compliance

Accounting

Finance

Investor

Relations

Operations

Technology

Legal

Risk

Management

Population Growth

Sources: UN Population Division and Population Reference Bureau. March 2009.

Years to Add Each Billion to World Population


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Finance

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Relations

Operations

Technology

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Risk

Management

Population Growth

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

1950 1965 1980 1995 2010 2020 2035 2050

Developed Regions Total population (thousands)

Less Developed Regions Total population (thousands)

The trend of the global population adding a billion denizens approximately every 12 years is

expected to provide continued demand for commodities across the complex to meet growing

energy, food, and infrastructure needs.

Source: United Nations Population Division, World Population Prospects. The 2008 Revision


Despite an accelerating upward trend in per capita oil consumption, China and India lag far behind

the US and other industrialized nations. The continuation of this trend would shift the global balance

of oil supply and demand.

Demand for Oil

Per Capita Oil Consumption

Source: CIA World Factbook

Barrels per day per 1,000 people

0

10

20

30

40

50

60

70

2003 2004 2005 2006 2007 2008 2009 2010 2011

United States China India


Commodities

Sources: Corn: USDA. Copper: Brook Hunt. Crude Oil: IEA. Cocoa: ICCO.

Corn: 1,000 metric tons. Copper: 1,000 metric tons. Crude Oil: 1,000 bbls/day. Cocoa: 1,000 tons.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Global Corn Demand

0

5,000

10,000

15,000

20,000

25,000

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Global Copper Demand

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Global Crude Oil Demand

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Global Cocoa Demand

The historical trend of increased global demand for commodities is displayed across sectors.


Exponential Effects of Demand

Source: UNESCO-IHE Institute for Water Education

6.6 Rice 449

4.2 Wheat 132

2 Corn 108

Grain Needed (lbs) to

Produce 1 Pound of Meat

Water Needed (gallons) to

Produce 1 Pound of Grain

6.6

4.2

2

449

132

108

6.6 Rice 449

4.2 Wheat 132

2 Corn 108

Grain Needed (lbs) to

Produce 1 Pound of Meat

Water Needed (gallons) to

Produce 1 Pound of Grain

Increased meat consumption is expected to contribute to a growing demand for grains as a feed

source for this production. This tax on agricultural supplies can also be seen in the growing

demand for fresh water as an integral component of the cultivation of a variety of grains.


Source: U.S. Department of Agriculture www.fas.usda.gov/psdonline

Shifting Diets

Per Capita Meat, Beef and Veal Consumption

Per Capita Consumption (KG)

0

5

10

15

20

25

30

35

40

45

50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

United States China India

A corollary of the ongoing urbanization of emerging markets is the continuing change of dietary

habits. A significant characteristic of urban areas is an increase in meat consumption, which can be

expected to further tax agricultural supplies.


Food Dependency


Production and Consumption in Millions of Tons

The last decade has seen a decoupling of the consumption and production of soybeans in China

where the commodity feeds both livestock and inhabitants. China’s growing population has fueled

its position as the world’s largest importer of soybeans.

Soybean Production and Consumption in China

0

10

20

30

40

50

60

70

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008

Production Consumption


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Commodities: Stocks to Use

Corn Soybeans

Wheat

Source: USDA

US stocks of Corn and Soybeans are near all-time lows, while US Wheat stocks have ample supply,

but have seen a recent deterioration in some of the sources of supply.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1964 1972 1980 1988 1996 2004 2012

US

0%

10%

20%

30%

40%

50%

60%

1964 1972 1980 1988 1996 2004 2012

US

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

1964 1972 1980 1988 1996 2004 2012

US


Decreasing Available Lands


0.040

0.080

0.120

0.160

0.200

0.240

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Arable Land Per Capita

Decreasing availability of arable land is expected to force agricultural yields to increase in order to

continue to serve the needs of a growing population. This has not happened. Increased reliance on

utilization should lead to greater sensitivity to supply shocks.

10 Confidential. Not for duplication or re-distribution.

Correlation Between Commodities and Equities

Correlation calculations use trailing 12 months of monthly observations. Historical Correlation Between S&P GSCI and S&P 500.

Data source: Bloomberg

Data range: 6/30/86 – 06/30/13

Co

rre

lati

on

(%

) M

ean

Lin

e

Throughout the course of multiple economic cycles, financial crises, and dramatic inflows of

investment to the commodity space, the short term rolling correlation between commodities and

equities has fluctuated between positive and negative values.

-100.0%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

May-87 Jun-89 Jul-91 Aug-93 Sep-95 Oct-97 Nov-99 Dec-01 Jan-04 Feb-06 Mar-08 Apr-10 May-12


Inflation Protection

Unlike stocks and bonds, commodity prices historically demonstrate a positive correlation with

inflation, and provided greater returns in rising interest rate environments.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. COMMODITY TRADING INVOLVES SUBSTANTIAL RISK OF LOSS.

Data sources: Bloomberg; Commodities are the Thomson Reuters/CoreCommodity CRB Index. Equities are the S&P 500 Index. Bonds are the JP Morgan Global Aggregate Bond Index.

12/31/93 – 11/30/12. Monthly observations.

(10%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

Commodities Stocks Bonds

Correlation to Inflation


Inflation Hedges

Unexpected inflation is calculated as the annual change in CPI less the average annual year over year change for the past 24 months.

The Thomson Reuters/CoreCommodity CRB Total Return Index was revised in June 2005, and data shown prior to then is hypothetical based on the index revision of June 2005.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. COMMODITY TRADING INVOLVES SUBSTANTIAL RISK OF LOSS.

Source: Bloomberg

Data Range: 2/28/98 – 11/30/12

Commodities have historically provided a valuable hedge against unexpected inflation. This is

important to investors since the value of their portfolios may erode during these episodic periods.

(5.00%)

(4.00%)

(3.00%)

(2.00%)

(1.00%)

0.00%

1.00%

2.00%

3.00%

(60.00%)

(40.00%)

(20.00%)

0.00%

20.00%

40.00%

60.00%

Feb-98 Nov-99 Aug-01 May-03 Feb-05 Nov-06 Aug-08 May-10 Feb-12

Thomson Reuters/Jefferies CRB Index (Left Axis)

Unexpected Inflation (Right Axis)


Inflation Protection

Source: Bloomberg. Data Range: 12/31/2002 – 9/30/2012

Commodities are the S&P GSCI Total Return. Commodity Equities is the CRBQX Total Return. Timber is the NCREIF Total Return Timberland Index. Real Estate is the Dow Jones US Real Estate

Index Total Return. TIPS is the Barclays US Government Inflation-Linked Bond Index. Emerging Markets is the MSCI Emerging Markets Index. Infrastructure is the UBS US Infrastructure Index.

MLPs is the Alerian MLP Index. Inflation is the CPI Index. Unexpected inflation as the annual change in CPI less the average annual year over year change for the past 24 months.

Historically, commodities have served as a better hedge to inflation AND unexpected inflation than

other asset classes which are typically viewed as possessing inflation hedging properties.

CommoditiesCommodity

EquitiesTimber TIPS

Emerging

MarketsReal Estate Infrastructure MLPs

Inflation 74.60% 54.67% 46.25% 29.33% 24.20% 23.05% 10.39% 0.43%

Unexpected Inflation 82.91% 55.81% 4.57% 47.34% 31.57% 44.90% 20.82% 31.26%

CommoditiesCommodity

EquitiesTimber TIPS

Emerging

MarketsReal Estate Infrastructure MLPs

Inflation 74.60% 54.67% 46.25% 29.33% 24.20% 23.05% 10.39% 0.43%

Unexpected Inflation 82.91% 55.81% 4.57% 47.34% 31.57% 44.90% 20.82% 31.26%


Most Commodity Futures Indices Have Underperformed Spot Commodity Prices…

•Past performance is not indicative of future results. Data Range: June 30, 2002 through December 31st, 2012. Source: Bloomberg

S&P 500 is a trademark of the McGraw Hill Companies, Inc. DJ-UBS Commodity Index is a service mark of Dow Jones & Company, Inc., UBS

AG, UBS Securities LLC or their affiliates. Any indices and other financial benchmarks shown are provided for illustrative purposes only, are

unmanaged, reflect reinvestment of income and do not reflect the impact of advisory fees. Investors cannot invest directly in an index. A price

of a spot commodity reflects the price of a commodity for immediately delivery.


Disclosures

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. COMMODITY TRADING INVOLVES SUBSTANTIAL RISK OF LOSS.

This document does not constitute an offer of any commodities, securities or investment advisory services. Any such offer may be made only by means of a

disclosure document or similar materials which contain a description of material terms and risks. This document, which has been furnished on a confidential basis, is

exclusively for the use of the person to whom it has been delivered, and it is not to be reproduced or redistributed to any other person without the prior written consent

of CoreCommodity Management. This information is for use by sophisticated or institutional investors only. Additional information is available upon request. This

investment may not be suitable for all individuals. No investments or services mentioned or described herein are available to “private customers” as defined by the UK

Financial Conduct Authority or to anyone in Canada not a “Designated Institution.”

CoreCommodity Management assumes no obligation to provide this information in the future or to advise of changes in this information. There is no assurance that

CoreCommodity Management will achieve comparable returns or avoid substantial losses. CoreCommodity Management and its employees may, for their own

account or for client accounts, trade in the markets and instruments in which the Programs trade, and in so doing may take positions opposite to, or ahead of, those

held by the Programs or may be competing with the Programs for positions in the marketplace. Such trading may result in competition for investment opportunities or

create other conflicts of interest for CoreCommodity Management in respect of its obligations to the investors in the Programs. The applicable Disclosure Document

contains a complete description of these and other material conflicts of interest.

All historical data for the TR/CC CRB In-The-Ground Global Commodity Equity Index (“CRBQX”) before its initial launch date of September 21, 2009 are simulated by

applying the index construction and methodology at such date to available historical equity values. The simulated data do not reflect the actual performance of the

index as it was constructed at the time of reporting index values. Instead, the simulated historical values reflect the index construction and methodology as of the initial

launch date which were designed with the benefit of hindsight. Simulated historical returns do not reflect the impact (if any) of market disruption or market emergency

events. Simulated historical returns do not reflect the impact that material changes in the underlying markets might have had on the decisions to use or continue using

certain securities and weightings in the CRBQX.

S& P 500, S&P GSCI and S& P Global Natural Resources are trademarks of The McGraw Hill Companies, Inc. “Dow Jones®”, “DJ”, “Dow Jones Indexes”, “UBS”,

“Dow Jones-UBS Commodity IndexSM”, and “DJ-UBSCISM” are service marks of Dow Jones Trademark Holdings, LLC (“Dow Jones”) and UBS AG, as the case may

be. Thomson Reuters/CoreCommodity CRB Index is a service mark of Thomson Reuters and CoreCommodity Indexes, LLC or their affiliates. CRBQX is the property

of S-Network Global Indexes LLC (“SNGI”). SNGI is the designer of the construction and methodology for the CRBQX and is responsible for the content of this

information. Reuters America LLC or its affiliates and/or CoreCommodity Indexes, LLC act as brand licensors for the CRBQX. MSCI is a trademark of MSCI Inc.

and/or its subsidiaries. Source of all index data Bloomberg, L.P. Any indices and other financial benchmarks shown are provided for illustrative purposes only, are

unmanaged, reflect reinvestment of income and do not reflect the impact of advisory fees. Investors cannot invest directly in an index.

THE INFORMATION CONTAINED HEREIN HAS BEEN PREPARED FROM ORIGINAL SOURCES AND DATA WE BELIEVE TO BE RELIABLE BUT WE MAKE NO

REPRESENTATIONS AS TO ITS ACCURACY OR COMPLETENESS. THIS SUMMARY HAS BEEN PREPARED SOLELY AS A PRELIMINARY DOCUMENT TO

DETERMINE INVESTOR INTEREST REGARDING THE PROGRAMS DESCRIBED HEREIN.

completecommodities sm · commodity trading involves substantial risk of loss. source: bloomberg...

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